BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE
Senator Dave Cox, Chair
BILL NO: SB 841 HEARING: 3/3/10
AUTHOR: Committee on Local GovernmentFISCAL: No
VERSION: 2/11/10 CONSULTANT: Detwiler
FIRST VALIDATING ACT OF 2010 (URGENCY)
Background and Existing Law
For over 70 years, the Legislature's annual Validating Acts
have boosted the stability and credit ratings of state and
local bonds. The Validating Acts cure public officials'
mistakes that might otherwise invalidate boundary changes
or bond issues. They also correct errors or omissions by
local agencies and state departments. The Acts do not
protect against fraud, corruption, or unconstitutional
actions.
Proposed Law
Senate Bill 841 validates the organization, boundaries,
acts, proceedings, and bonds of the state government,
counties, cities, special districts, school districts, and
redevelopment agencies, among other public bodies.
Comments
1. To err is human, to forgive is legislative . The annual
Validating Acts protect investors from the chance that a
minor error might undermine the legal integrity of a public
agency's bond. Banks, pension funds, and other investors
will not buy public agencies' securities unless they are
sound investments. Investors rely on legal opinions from
bond counsels to assure the bonds' credit worthiness.
Without legislative action to cure technical errors, bond
counsels are reluctant to certify bonds as good credit
risks. SB 841 gives legislative protection to public
agencies and private investors.
2. Which mistakes ? The Validating Acts cure
typographical, grammatical, and procedural errors. They do
not forgive fraud, corruption, or unconstitutional acts. A
local official who makes a technical error will find
SB 841 -- 2/11/10 -- Page 2
reassurance in the Validating Acts, while a corrupt
official faces prosecution regardless of the Acts.
3. Taxpayers benefit too . By insulating state and local
bonds against harmless errors, the Validating Acts save
taxpayers' money. Strong legal opinions from bond counsels
result in higher credit ratings for state and local bonds.
Higher credit ratings allow state and local officials to
pay lower interest rates to private investors. Lower
borrowing costs save money for taxpayers.
4. Why three ? Starting in the mid-1920s, the Legislature
passed separate validating acts for different types of
bonds, several classes of special districts, and various
local boundary changes. By the late 1930s, the practice
was to pass annual comprehensive validating acts (AB 2842,
Bennett, 1939). The current custom and practice is to pass
three Validating Acts that retroactively cure public
officials' mistakes. The first two measures are urgency
bills that go into effect when they are chaptered. SB 841
(First Validating Act) will probably reach Governor
Schwarzenegger's desk this spring, validating errors made
before the date on which the bill is chaptered. SB 842
(Second Validating Act) will reach Governor Schwarzenegger
in August, validating mistakes made after SB 841. The
Third Validating Act (SB 843) will take effect on January
1, 2011, covering the period between the chaptering of SB
842 and the end of 2010.
Support and Opposition (2/25/10)
Support : State Controller John Chiang, State Treasurer
Bill Lockyer, American Federation of State, County and
Municipal Employees AFL-CIO, California Association of
LAFCOs, California Association of Sanitation Agencies,
California Public Securities Association, California
Special Districts Association, California State Association
of Counties, League of California Cities, Regional Council
of Rural Counties, Urban Counties Caucus, County of
Sacramento.
Opposition : Unknown.
SB 841 -- 2/11/10 -- Page 3